After a quiet day on the markets yesterday for Columbus Day focus now moves to a number of important speeches from US Fed members this week.
Any new clues that the US is on course for another interest rate hike in December is likely to see additional gains for the dollar. Focus also moves to Thursday’s important inflation data. The US Fed is mandated with both employment and price stability so anything new in the inflation numbers this week is likely to see a big reaction for the dollar.
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Rising inflation has been raised as a concern and a strong number this week would likely reinforce a December rate hike which should be positive for the dollar. GBP USD rates meanwhile are set for a rollercoaster of a week, with Brexit developments expected imminently ahead of the EU summit later this month. A proposal from the EU is expected on Wednesday which could offer new direction for GBP USD.
In a sign that the trade war between China and the US could drag out for a sustained period of time, the Peoples Bank of China announced stimulus measures this weekend to spur economic growth. There is a general feeling that China is concerned that its economy could see an economic slowdown. This is no surprise considering that it has come to light that the Trump administration is seeking to isolate China on trade by preventing other countries from striking separate trade deals. In the case of the recently negotiated NAFTA agreement between the US, Mexico and Canada it has been reported that there are clauses which require Canada and Mexico to notify each other of any discussions on trade with external parties and that the US could withdraw from NAFTA altogether if it is unhappy with any developments.
With this in mind the dollar is likely to retain its safe haven status as investors flock to the dollar in fear of a prolonged trade war between the US and China.
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